Memo to the “Dangerous Voices”: Remember Japan

Yen dips as Yoshihiko Noda proposes snap elections

Japan’s yen has fallen after Prime Minister Yoshihiko Noda said he was set to dissolve parliament and hold a snap election.

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There is no guarantee the government would win an election, and the opposition has called for aggressive monetary easing by the central bank.

Its leader, Shinzo Abe, has said the bank should print “unlimited yen” to help fight deflation.

Analysts said such a move would weaken the yen even further.

Ya think?

Mr Abe, the leader of the Liberal Democratic Party (LDP), has said that the bank of Japan (BOJ) needed to set an inflation target of 3% instead of its current 1% goal to help revive growth in the economy.

“If we take power, we’d like to do our utmost to beat deflation,” Mr Abe said. “In doing so, monetary policy would be key.”

He indicated that if elected, he would review the BOJ law that guarantees its independence from the government.

Memo to the Dangerous Voices: remember Japan. Stop fretting about fiscal policy, fix the demand problem at source: bad monetary policy. Japan is still fighting to get their central bankers to do the right thing, twenty years after the BoJ drove the Japanese economy off a cliff. I don’t want to still be blogging about UK monetary policy when I’m old and grey.